Money management is a challenge for most individuals, regardless of age, unless they happen to have a knack for finance. It isn’t something that naturally clicks for everyone. We might have a basic understanding of how much should be set aside for bills and necessities, but savings and investment are often left scratching our heads.
Moreover, our financial priorities and obligations are continuously shifting as we age. For instance, the budgeting strategies and goals one adopts in their 20s are likely to change significantly by the time they reach 30 or midlife. As life progresses and evolves, our financial responsibilities follow suit.
How then, without the assistance of a financial planner, do we gauge what to budget for as we navigate each decade? Here are some fundamental guidelines on adapting your budget to comfortably afford each life stage and plan ahead.
Budgeting in Your 20s
The 20s are both an exciting and daunting time as most individuals take their first steps into adulthood and the job market post-college. Tackling accumulated debt is usually the foremost concern at this stage. Therefore, your 20s budget should comprise three primary parts: necessities (including debt repayment), savings, and some money for leisure activities.
Crucially, start building an emergency fund. Life can throw unprecedented surprises your way, and having a financial buffer is likely to prove lifesaving. Allot a portion of your income for additional savings post necessary bills and others. Setting up a 401k or IRA retirement account early on will significantly pay off in the long run.
Budgeting in Your 30s
The 30s introduce a host of new considerations to your budgeting strategy. You might still be servicing debt, which should remain a fixture in your budget. Major life decisions like buying a house and starting a family begin to assert their financial presence. It’s a good time to start budgeting for a house down payment or savings to bear future kid-related expenses.
Budgeting in Middle Age
Your 40s and 50s primarily focus on saving and planning for retirement. Ascertain the amount required for retirement whilst paying off any lingering high-interest debts. Ensure your emergency fund remains healthy. Revisit any college savings you might have initiated for your kids. Investments start paying off around this stage, adding to your retirement cushion. Still, avoid splurging too much and save for any long-term care required in the future.
Budgeting for Retirement
From your 60s and beyond, risk management becomes crucial in financial planning. Tailor your budget to what you envision your retirement to look like. Bear in mind long-term care and assign funds in your budget accordingly. Draw a blueprint to navigate your retirement, keeping in mind the budget changes that retirement will require.
Budgeting at any age can be intimidating, especially when you view the vast array of future obligations and savings. But precise planning and timing can simplify the process more than you think. As life evolves with age, so should your budget. Timely and appropriate adjustments will ensure readiness for each life stage, including a worry-free and well-deserved retirement.
What are your views on how a budget should adapt with age? What budgeting adjustments have you already implemented?
– Smartasset.com
